U.S. Lawmakers Found A Temporary Deal But Challenges Persist

Christophe Barraud

President Barack Obama signed into law a measure ending the 16-day U.S. government shutdown and extending the nation’s borrowing authority until early next year, the White House said today in a statement:

The measure was passed by wide margins in the House and Senate last night, ending a weeks-long fiscal stalemate between the Obama administration and Republicans in Congress. The bill passed on an 81-18 vote in the Democratic-led Senate, followed by a 285-144 vote in the Republican-controlled House.

Concerning the consequences of the shutdown, S&P estimates that it will reduce the Q4 output by $24billion. In parallel, A Pew Research Center poll showed that the longer the shutdown went on, the more Americans blamed Republicans over Obama and other Democrats.

The partial government shutdown that resulted from the deadlock has taken at least $24 billion out of the U.S. economy so far, reducing fourth-quarter growth by at least 0.6 percentage points, according Standard & Poor’s…

A Pew Research Center poll showed that the longer the shutdown went on, the more Americans blamed Republicans over Obama and other Democrats. Seventy-two percent of Americans surveyed Oct. 9-13 disapproved of the job Republican leaders in Congress were doing, while 51 percent disapproved of Obama’s performance. Lawmakers have more than a year before they face voters again in midterm elections.

The last-minute agreement doesn’t eliminate the core conflict in Congress over fiscal policy, and the temporary funding extension for the government expires on Jan. 15. The debt ceiling increase expires Feb. 7. As a consequence, the two parties will fight again in three months (continuing resolution, debt ceiling and 2014 budget).

My view is that this agreement is a good news because it will reduce uncertainty in the short term and will boost consumer confidence (after reaching a nine-month low) as holidays approach. However, this agreement is only temporary and therefore companies’ visibility should remain limited until Q1 2014, limiting CAPEX and hiring.